Case Review
M&R’s implementation of the balanced scorecard, Strengths, and Weaknesses
In 1990, M&R was incurring a loss; however, the reorganization of the business process in 1993 led to the turnaround. Series of changes were made right from the basic decision making to compensation plans. Most of the changes made were in accordance with the approach advocated by Kaplan & Norton, i.e., Balance Score Card (BSC). Under this approach, the following changes were made in the organization: the small teams of young managers with creative ideas to evaluate the performance of the organization were created; under the BSC approach, there are four perspectives, namely: Customer, Financial, learning and Internal. In total, 32 metrics were identified under these four perspectives; employees were trained to respond to the new approach; the Practice of regular feedback from customers was started, which led to continuous improvement in services, and Compensation was linked with the performance.
M&R management team implemented the Balance Score Card after thorough research about the approach and took the risk to implement a new system of doing business. Its strengths include: it helped the company to gain competitive advantage and also become the pioneer in its industry. Also, it helps in training employees to help in ensuring they are able to adapt to a new working environment. As well, it ensured all organization departments were harmonized to work together in achieving organizational goals. Business strategies were aligned towards compensation plans promoting performance within the organization. However, the weaknesses of the program include; it emphasizes less over financial factors, attention over operation sometimes leads to a loss in the long term because of heavy expenditures. Also, most employees are not willing to learn new approaches, which can create hurdles in an effective approach. It is sometimes hard to quantify the net benefit achieved.
Effects of adoption of Balance Scorecard on Organization’s Financial Performance
The adoption of the balanced scorecard strategy improved the company’s performance. This is because it helped to the reorganization of the company’s goals and outlined factors that needed to be implemented to achieve those goals. As well, it helped the organization to work on its vision and also transforming vision to action. Also, it helped in aligning strategic business objectives with the execution process to ensure performances were met. Furthermore, it allowed internal and external feedback that helped in improving organization performance. It helped in improving employee motivation because good performances indicated more financial rewards.
However, full credit cannot be given to this approach only. The management team took several other small and big steps, such as: changing compensation plans, which led employees to earn more bonuses if the company achieves its predetermined goals. To serve the customers with a one-stop solution for groceries, snacks, and fuel, they redesigned their convenience store to become a one-stop store. With the introduction of BSC, the performance measurement of the organization has improved, but this was not the only reason for the turnaround. As such, the company management team created a new working environment. The friendly environment allowed employees to increase their productivity, which improved the company’s performance.
Zimmerman, J. L. (2014). Accounting for decision making and control (8th ed.). New York, NY: McGraw-Hill.
- Chapter 14, “Management Accounting in a Changing Environment” (pp. 608–633, 648–649)
- Case 14-1, “Global Oil” (pp. 648–649)